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Knowledge Economy Transfer Channels: International, MENA, Jordan


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Knowledge Economy Transfer Channels, Absorption, Retention, Enablers and inhibitents in International Literature, MENA : Challenges and Recommendations, Focus Jordan Case Study

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Knowledge Economy Transfer Channels: International, MENA, Jordan

  1. 1. Knowledge Transfer in MENA Countries Jordan Case Study Table of Content Page Introduction Knowledge transfer and absorption in knowledge economy 4 Part I Identification of key drivers and enabling environments for 5 knowledge transfer and absorption, internationally Policies Socio-economic regimes Education & human capital Innovation, S&T, R&D ICT infrastructure Part II Situational Analysis of the Knowledge Transfer Channels in the 17 Middle East and North Africa (MENA), Gaps and Recommendations Socio-economic regimes Education & human capital Innovation, S&T, R&D ICT infrastructure Recommendations on MENA level Recommended guidelines on MENA level Part III Deduction and Assimilation based on Findings & Enabling Factors 43 for Knowledge Transfer in Jordan (A Case Study) - Jordan Case Study Executive Summary Socio-economic regimes Education & human capital Innovation, S&T, R&D ICT Infrastructure Gaps Recommendations Addendums: Acknowledgements Annexes 91 List of tables 2 List of figures 3EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 1 of 115
  2. 2. List of Tables (Back to Table of Content) Table 1 Inward FDI flows, in $M, current prices & exchange rates, 2000-2010 (sorted & rounded figures 2010) MENA Table 2 Outward FDI flows, $M, current prices & exchange rates, 2000-2010 (sorted & rounded 2010) Table 3 Indicators of the KE index for Arab countries (KE Report) Table 4 Availability of knowledge indicators for Arab countries included by the WB Table 5 Total public education expenditure as % of GNP & % of total government spending (median), 2005 Table 6 Main Economic Indicators – JD M Table 7 Budgetary Central Government, 2010 (domestic revenue & public expenditure) Table 8 Sectors contribution to GDP (%) (3rd Q 2011) Table 9 GDP/ expenditure & value added $M current prices & exchange rates Table 10 Foreign Trade Statistics (Thousand JD) Table 11 Jobs Analysis Table 12 Investment projects per sector Table 13 Education distribution statistics Jordan Table 14 Economic Activity (employment) – Jordan Table 15 Employment within the Population of Jordan / 6,249,000 (100%) Table 16 International flows of mobile students– tertiary education & ISCED 5 & 6 levels (2009) Table 17 Internationally mobile students by host country & origin – tertiary education & ISCED 5 & 6 levels (2009) Table 18 Mobile students by region of origin Table 19 The distribution of students in tertiary and higher education Table 20 List of tertiary and higher education institutes Table 21 Students enrolment over mostly attended public and private universities Table 22 Unemployed youth > 15 years of age, per gender and academic achievements in percentages Table 23 ICT Exports to Arab countriesEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 2 of 115
  3. 3. List of Figures (Back to Table of Content) Figure 1 Knowledge Economy Values MENA Figure 2 Index values for the pillars of KE for Arab Countries, G7 and the world Figure 3 Latest KEI compared to 1995 Figure 4 Summary of Central Government Budget, 2006 – 2010, JD M Figure 5 Domestic and foreign investment in million JD Figure 6 Foreign investment in million JD Figure 8 Size of domestic investments in 2010 Figure 9 Size of foreign investments in 2010 Figure 10 Consequent job creation (2010) Figure 11 Growth of total exports, 2000 - 2009 Figure 12 Growth of imports, M JD, 2000 - 2008 Figure 13 Job Analysis Jordan Figure 14 FDI inflows and outflows in $M Figure 15 National Agenda of Jordan Phases Figure 16 Unemployment per age groups, 2000 – 2009 Figure 17 Jordanian students in higher education Figure 18 Outbound Jordanian Students Figure 19 Outbound Jordanian Students distribution per country Figure 20 iPARK statistics Figure 21 Researchers per million population in the Arab world, 2007 Figure 22 ICT sector contribution to GDP Figure 23 ICT sector contribution to employmentEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 3 of 115
  4. 4. IntroductionKnowledge Transfer and Absorption in Knowledge Economy(Back)Todays global economy is one in transition to a "knowledge economy1" focused on the production andmanagement of knowledge where knowledge is a product; using knowledge technologies where knowledge is atool, to produce economic growth and job creation. Within interconnectivity and globalization settings,knowledge resources are as critical as economic resources and the application of knowledge is key forgrowth in the global economy; where organizations and people acquire, create, disseminate and useknowledge more effectively for greater economic and social development. The knowledge revolutionincorporates education, life-long learning, S&T, innovation and increased investment in R&D – morethan that in fixed capital2, supported by ICT. Making effective use of knowledge in any country requiresdeveloping appropriate policies, institutions, investments and coordination across these four functionalpillars3 that help countries articulate strategies for their transition to a knowledge economy (WB Model):  Socio-Economic Regime: an economic and institutional regime that provides incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship.  Education: an educated and skilled population that can create, share and use knowledge well.  Innovation: an efficient innovation system of firms, research centres, universities, think-tanks, consultants and other organizations that can tap into the growing stock of global knowledge, assimilate and adapt it to local needs and create new technology.  ICT Infrastructure: that can facilitate effective communication, dissemination and processing of information.Alongside the same vision, the EIB has been financing investment in development, education, research,innovation and ICT – i.e. pillars of knowledge economy, since 2000, for the establishment of acompetitive, innovative and knowledge-based society, capable of sustainable growth, creation of moreand better jobs and greater social cohesion, in addition to its keenness in supporting entrepreneurship andtransfer of technologies that are essential for RDI and its progress4. In fact, both the EU and EIB,according to the European Growth Initiative, are launching 56 projects that invest in networks andknowledge across the EU generating strong cross-border impact and expected to yield positive results interms of growth, jobs creation and protection of the environment.In light of the dominancy of knowledge in post-industrial turned knowledge economy society; residing inorganizations, tools, tasks and networks; “knowledge transfer”5 has become essential in organizing,creating and disseminating tacit knowledge6 ensuring its availability for future users, becoming a publicand advanced economies and policies context, from resource-based to knowledge-based production7. Amain transfer enabler is “diffusion of innovation”8, denoting the “how, why and at what rate” new ideasand technologies are spreading through cultures. It is also defined as a process by which an innovation iscommunicated through “Knowledge Transfer Channels” over time in socio-economic systems. Foreigndirect investment (FDI) and international trade, are two major channels for international technologytransfer, through which cross-border technological knowledge travels. Factors promoting “knowledgediffusion“ are the identification and motivation of knowledge holders towards designing a sharingmechanism that facilitates transfer, executes a transfer plan, measures transfer and applies the transferredknowledge. This process is further guided by experience, experimentation, simulation, mentorship, workshadowing9, paired work and community of practice (CoP)10. On the other hand, knowledge transfer1 See Definitions3 See Definitions7 OECD (1999), Managing national innovation systems, OECD publications service, Paris8 See Definitions9 See DefinitionsEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 4 of 115
  5. 5. between nations and within organizations raises concern where there is imbalance in power relationshipsor relative needs for knowledge resources e.g. developed and developing worlds (Harman & Brelade2003)11. Impediments to knowledge transfer are attributed to accessibility, source, recipients,organizational context and implementation. Knowledge transfer maybe also hindered by distance, ICTlimitation, lack of a shared social identify, language barriers, areas of expertise, internal conflicts,generational differences, lack of incentives, disability to visualize, beliefs, previous experiences orexposures, misconceptions, faulty information, resistant cultures (highly non-conductive to knowledgesharing), motivational issues, lack of trust and incapability. ICT-based innovation diffusion, education andR&D render knowledge, as a fixed and intangible capital. Knowledge transfer, can only occur in thepresence of its enablers, namely: knowledge holders, transfer channels, knowledge recipients anddiffusion that will lead to well being (van der Meer, EIB, CMI 2011)12.An individual, group, firm or nation’s ability to recognize the value of new information, assimilate it andapply it to commercial ends and in business, has been defined as the “absorptive capacity”, an enablerof innovation, based on developing cumulative absorptive capacity (Cohen and Levinthal 1990)13,investment in R&D and hiring of diverse teams serving diversity and creativity. Two concepts governabsorptive capacity: i) Receptivity14: a firms overall ability to be aware of, identify and take effectiveadvantage of technology; and ii) Innovative routines: adoption of practiced routines that define a set ofcompetencies the firm is capable of doing confidently and the focus of the firms innovation efforts(Nelson & Winder 1982)15. Enablers to evaluate absorptive capacity include (Zahra & George 2002) 16: i)Knowledge acquisition capability (number of years of experience of the R&D department, amount of R&Dinvestment), ii) Assimilation capability (the number of cross-firm patent citations, the number of citationsmade in a firm’s publications to research developed in other firms), iii) Transformation capability (number ofnew product ideas, number of new research projects initiated) and iv) Exploitation capability (number ofpatents, number of new product announcements, length of product development cycle).Part IIdentification of Key Drivers and Enabling Environments forKnowledge Transfer and Absorption, Internationally(Back) A. PoliciesMaking effective use of knowledge in any country requires developing appropriate coordinated policiesand institutions within the necessary supportive legislative framework (UNDP AHR 2003)17, to articulatetransitional and long term strategies for knowledge economy, through socio-economic regimes, educationand human capital, innovation, S&T, R&D and ICT Infrastructure, in a cross-cutting and integratedmodel that supports knowledge transfer and absorption capacity across sectors (finance, education,health, energy, ...), respective of enabling environments (policies, regulative and institutionalized systems,governance, reform...), that promote levels of development, advancement, economic growth and jobcreation. Demand-driven national policies promote economic and political contexts conducive toknowledge transfer and promotion of absorption capacity, heeding sector-related domestic enablingfactors across channels and institutional characteristics.10 See Definitions11 Harman, C.; Brelade, S. (2003). Knowledge Management Review (Melcrum Publishing) 6 (1): 28–31.12 KT and Absorption in MENA, Dr. Jacques van der Meer, EIB, CMI 201113 Cohen and Levinthal (1990), "Absorptive capacity14 Seaton R.A.F. & Cordey-Hayes M., Technovation, 13: 45-53, 1993.15 Nelson & Winter (1982), "The Schumpeterian Tradeoff Revisited",16 Zahra and George (2002), "Absorptive Capacity: A Review, Re-conceptualization and Extension"17 UNDP AHR 2003, AKR 2009EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 5 of 115
  6. 6. The dominant, dynamic and rapid social, economic and technological changes will shape life in the 21stcentury, dwelling on human capital as key enabler in new knowledge-intensive environments andincreasingly competitive economies, creating a broad pallet of unprecedented opportunities, yet bringsuncertainties and risks (Michalski)18. Accepting change and adaption are key, as we approach an integratedplanet of socio-economic and technology systems, where knowledge has become the predominant input,output and structural feature of economy and society in the 21st century, in addition to inter-connecteddigital networks, acting as socio-economic and knowledge transfer enablers. Governments will not beable to meet highly diverse markets and societies and will focus on providing enabling conditions toempower citizens to determine their choices and life paths. This will empower diversity, creativity andcomplexity, which are the heart of the transition to knowledge-intensive socio-economies, yet digitaldivides will grow in terms of accessibilities, usage, easy access to the new wealth, attainment of goodeducation and the ability to interpret effectively the use of information.Michalski predicts either one of two reactions: embracing dynamic transformation, creativity andexperimentation, within competitive international environment, or de-link from globalization and delaystructural change and innovation with the aim of avoiding associated problems, turbulences anduncertainties; the latter of which is extremely harmful and costly choice, as an attempt to preserve the pastat the expense of the future. Michalski advocates for change for long-term benefits, based on values-fedsustained innovation, supported by policy.B. Socio-economic regimes (Back)A policy driven socio-economic regime, enables knowledge transfer and absorption, reliant on acoherent and supportive legislative system, sufficient allocation of funds and financial resources, adequateICT infrastructure and sound economic and sectors-specific policies that support human capital,innovation and R&D. It harbours services and business sectors support, institutionalized organizationalcontext, investment, consolidation of linkages between R&D institutions and industries, investing inbuilding high human capital and local knowledge workers, across all policies-governed sectors, in order toachieve economic growth, through international skills gain, knowledge transfer, increased knowledgecontent and innovation.Most effective knowledge transfer channels include: FDI, international trade, human capital mobility andscientific cooperation in education and research.In the knowledge economy formula, developed economic policies are key knowledge transfer enablers,that support increased diversification of economies, creation of new enterprises and jobs, increasedproductivity, competitiveness and institutionalized capacities by increasing institutional knowledgetransfer, knowledge content, innovation and therefore increased absorptive capacity of the economy,where FDI and international trade are two major channels through which technological knowledgedeveloped in one country is transferred across borders into another (Saggi, Keller & Pantia)19. FDI IndicatorsThe FDI indicators facilitate achieving competitiveness among countries in support to investment policy reformsand open doors to broader investment climate improvements.Indicator Indicator Details Enablers Target audienceDoing Business-type  Starting a business  Foreign ownership Governmentsindicators of  Dealing with licenses restrictions to target, stimulate,investment policy  Employing workers  Investment promotion implement and  Registering property  Pre-establishment communicate investment  Getting credit procedures policy reforms  Protecting investors  Access to land Investors  Paying taxes  Currency convertibility to help guide their18 Ref. Prof. Dr. Wolfgang Michalski - The Role of Education in the Knowledge-Intensive Economy and Society of the 21st Century19 Saggi, 2002; Keller, 2004 and Kneller, Pantea and Upward, 2009EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 6 of 115
  7. 7.  Trading across borders and repatriation investment location  Enforcing contracts  Expropriation and int’l decisions and policy  Closing a business arbitration dialogue with  governmentsCountry benchmarks for • Employment restrictions on expatriates Advisors / Consultantsthe ease of • IPR protection and enforcement to focus their assistance toestablishment and • ADR mechanisms clientoperation of a foreign • Excluded investment climate variables: countries on key policy-owned business in a • Infrastructure level constraintscountry • Human resources to increasing FDI • Trade policy competitivenessMeasures of formal  Survey of laws/regulations (objective info) andstatutory restrictions administrative processes (subjective info)on FDI, and regulatory  Respondents are private sector, intermediariesand administrative (investment lawyers, consultants, accountants, ...)barriers in practice  Survey filled out by governments for validation / cross- checking purposes Source20: Global Forum on International Investment, 2008Economic policies aim to enhance the business environment by promoting ease of business creation andlicensing, ownership, finance, local competition and openness to trade and investment, as well as productmarket flexibility, in a two-way producer-consumer knowledge transfer (Cowan, Soete and Tchervonnaya,2001)21, while heeding different types of key determinant domestic institutions in terms of knowledgeabsorption capacity, namely private and public sectors, research institutions and education.There are estimates that more than half of the GDP in major OECD countries22 is based on theproduction and distribution of knowledge (WB 1099).The services sector23 has increased in importance in promoting growth, as an enabler for knowledgetransfer, through various channels, in the context of the new economy, creating the need for companiesto sustain themselves in highly competitive markets by improved accessibility and usage of newknowledge that is relevant to their activities. This section looks closely at this sector, at the internationallevel, in terms of its enabling environment, channels, domestic determinant factors and challenges,serving as a guideline to assess countries knowledge transfer absorption, alongside this and other vitalsectors. Moreover, knowledge transfer channels in manufacturing and services are very similar, yet thelatter, i.e. the service sector, is gaining more importance than the manufacturing sector in terms of FDIand international trade (training and producer-consumer two-way knowledge transfer); averageimportance in terms of suppliers, licensing/franchising, intra-company strategic knowledge management,knowledge intensive business services, human capital mobility, Internet and links with academy; and lessimportance in terms of patents.The impact of ICT is seen on the macroeconomic level (Kozma, UNESCO)24, every one of the world’s25 largest economies has shifted from manufacturing to services provision, accounting to more than 50%of the GNP (Kamarkar and Apte, 2007; Apte, Kamarkar and Nath, 2008).In the USA, manufacturing material goods and delivery of material services accounted for nearly 54%economic output (1967). Production of information products and provision of information services20 FDI Indicators Project, OECD Global Forum on International Investment, 2008, Peter Kusek, - FIAS The multi-donor investment climate advisory service of the World Bank Group. Cowan, Soete and Tchervonnaya, 200122 The Organization for Economic Co-operation and Development (OECD), There are currently 34 members of the OECD / Knowledge Transfer and the Services Sector in the Context of the New Economy by Robin Cowan, Luc Soete & Oxana Tchervonnaya - 2001-202124 The Technological, Economic and Social Contexts for Educational ICT Policy, Robert B. Kozma . A UNESCO PublicationEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 7 of 115
  8. 8. accounted for 63% of output (1997), marking a growth from 36% to 56%. People now use eBay, Googleand Yahoo, none of which existed 15 years ago, yet their combined market value exceeds $200 billion.The proliferation of information products and services or “information economy” is dominating wealthand job creation (Cogburn and Adeya, 1999). On the other hand, manufacturing increased in China,Thailand, Malaysia and Indonesia, creating jobs and pulling millions out of poverty (Sachs, 2005, 2008),but significant problems were created related to economic inequity, urbanization, pollution andenvironmental degradation. Macroeconomic and microeconomic studies (11 Papers, 6 Countries)25showed changes in organizational structures and practices, towards organizationally flatter companies,decentralized decision-making, participatory disciplines and wide sharing of information. These changeshave been enabled by the application of ICT for communication, information sharing and simulation ofbusiness processesThe use of ICT is promoting new content of knowledge through new types of competencies calling forknowledge-intensive services consultancy and growing codification (e.g. delivery of traditional knowledgeor advanced memory storage features), with improved inter- and intra-firm communication. Customerparticipation in service operations may control the specification of the service, or its diagnostics, or co-production (e.g. self-service retailing or banking, excluding high expertise requirements), or intervention(e.g. tracking courier shipment), where services are best categorized as private or public services, on- oroff-line and producer or consumer-based. Simultaneity of production and consumption, more evident inservices as opposed to goods industries, is related to or caused by the inability to store services. This isgradually changing today, as new technologies – like clouding, offer broad opportunities for new e-meansof storage. Most service industries are now employing “innovation without formal research” (as opposedto the industrial sector), given the non-tangibility nature of services, hence less patentable, but closelylinked to “changes in processes, organizational arrangements and markets”; in large service companiesR&D is performed in “operations research, strategic planning or IT departments”. "Not only does a countrys total productivity factor depend on its own R&D capital stock, it also depends on the R&D capital stocks of its trade partners." (Coe and Helpman p.875).The ICT and high-speed communication networks have revolutionized innovation. In Denmark, 70% of serviceindustries innovative firms use mobile phones and email for innovation, while 40% use Internethomepages (Van Ark et al. 1999)26. The use of Internet to offer services to customers is considered as aninnovation, with increasing trends towards e-services to include delivery of “functions” such as themaintenance of goods, within enhanced security schemes and networks to facilitate communicationbetween different kinds of users with different kinds of data. Call centres are representing a substantialshare of employment in the service sector. It can be concluded that a strong ICT infrastructure is an enablerfor knowledge transfer in services, as relatively inexpensive way to transfer large amounts of information(and knowledge) at a very high speed and hence is conducive to formation of producer-user, producer-producer and consumer-consumer networks which are capable of generating considerable knowledgespill-overs to the service industry and the society at large.Selection of knowledge transfer channels is affected by cost, speed, accessibility, IP rights protection and pastexperience, so that a knowledge transfer channels platform, is reliant on: knowledge holders, recipients andinstitutional settings, where knowledge holders regulate the amount and quality of shared knowledge andrecipients need to be ‘receptive’ to the flow and absorption of knowledge – often a limiting factorattributed to “resistance to change”. In transfer channels suppliers provide new equipment hence newknowledge for product enhancement. In Germany, 27% of the total innovation expenditure came fromequipment service delivery. FDI as a knowledge transfer channel affects the inward and outward investmentsand brings new knowledge into a country, particularly to intangible services and consequent contributionto a country’s GDP, e.g. the FDI by/in the Netherlands, in the services sector had grown by 20 fold over25 USA (Stiroh, 2003), UK (Borghans and ter Weel, 2001; Dickerson and Green, 2004; Crespi and Pianta, 2008), Canada (Gera and Gu, 2004; Zoghi, Mohr and Meyer, 2007), France (Askenazy, Caroli and Marcus, 2001; Maurin and Thesmar, 2004), Finland (Leiponen, 2005), Japan (Nonaka and Takeuchi, 1995) and Switzerland (Arvanitis, 2005)26 Van Ark et al. 1999, p.31EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 8 of 115
  9. 9. the last two decades accounting to the largest share of Dutch FDI stock (Van Hoesel & Narula 1999)27.However, for this channel to function properly it is necessary to have a favourable regime for serviceproviders functioning abroad. The General Agreement on Trade in Services (GATS) ensure effectiveknowledge transfer in services through FDI via market access commitments, transparency andrecognition of qualifications. Human capital mobility as a channel relies on human beings as “carriers” oftacit knowledge, particularly in organized two dimensional mobility across firms or institutes, while otherchannels depend on “employees’ profiles” where services are directly delivered. Liberal and transparenttrade and investment regimes, are also major enablers of knowledge transfer.Intellectual property protection: an important specificity of services is that patents are less importantinstruments for IP protection in this sector, since much of the difficult-to-codify innovative capacity ofservice firms resides in human experience and expertise and shortness of innovation cycles for “lengthypatenting procedures”. Hence, most service industries employ other forms of IP protection likecopyrights and trademarks. Consumers‘ knowledge involvement, on the other hand, is based on a learningdialogue between supplier and customer in highly interactive ways, while sources of consumer information isreflective of the consumers’ attention to the whole service delivery system where policy-backedenhancement of employee expertise in people-to-people communication is so important in relation toinnovation and economic performance, therefore, emphasis on multi-disciplinary and lifelong learningmust focus more on working in teams, communicating effectively, networking and adapting to change.This leads to education and networked knowledge economy, based on merging ICT and tools in education,instilling knowledge economy, entrepreneurial and job creation skills, within national, scalable and lowcost schemes. The Internet is a constantly growing channel serving different users in services andmanufacturing sectors, to receive and transmit knowledge.Other service sector channels of knowledge transfer include: licensing as in franchised services, industry-academia linkages, job related training, employing intra-company strategic knowledge management suchas Intranet or MIS, producer-consumer two-way knowledge transfer, knowledge intensive businessservices by private enterprise reliant on professional knowledge to produce knowledge-based productsand services such as computers, engineering, advertising, R&D, accounting and management consultancy,as well as knowledge generation and transferring through international conferences in both manufacturingand services sectors.Enablers across channels are comparable between manufacturing and service sectors, according to thespecificity of services, nature of output, degree of customer participation in the production process,simultaneity of production and consumption, so that new economy services are impacting employmentand development of knowledge and skills, e.g. financial, software or digitized entertainment andshopping services, by using new technologies, innovation and on-line provision, denoting a clear demandfor e-commerce related services. It is essential to compare manufacturing and services sectors accordingto the nature of output, customer participation and simultaneity of production and consumption, in terms ofknowledge transfer, transfer channels, knowledge holders and recipients; institutional settings and impactof ICT.The challenge of constantly changing scientific and technological realities, the level of knowledge requiredto manage modern industries is so high, that even competitors are choosing to collaborate, where output,innovation and knowledge creation are rapidly gaining more importance, as intangible services impacteconomic performance.The impressive input of services into the economic development of many countries, including theNetherlands, has put it on an equal footing with manufacturing, so that more elaboration is placed oninnovative policies, measurable by service-oriented innovation surveys (implemented by several OECDcountries).In general, recommendations to policy-makers on knowledge transfer in the services sectors (a case studyof the Netherlands), include the need for IP protection for national and foreign business; regular27 Van Hoesel and Narula 1999, p.16EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 9 of 115
  10. 10. innovation surveys; investing in a country’s ICT infrastructure, merging ICT in education, participation ofnational scientists in international networks directing diffusion of new knowledge to service businesses;training of future scientists; promote knowledge transfer in a two-way process; encourage foreignspecialists through incentives; publishing information on legal procedures; maintaining liberal andtransparent trade and investment regimes.Drivers of development (DFID, Dec. 2011)28 in low income countries depends on human capitalpressures stemming from private sector growth, public sector policies and reforms which remain poorlyunderstood, amidst a likely global recession and possible global financial meltdown with seriousconsequences on private sector growth, prompting fast research-backed policy-making to ensure supportto private sector development. Market dynamics on the other hand determine entry of new firms and exitof weak ones, prompting needs for job creation in low income countries and support to opencompetitiveness.The World Bank (Doing Business, WB/IFC 2012)29 investigated enhancive regulations for businessactivities and inhibitors, across 183 economies, reliant on comparable quantitative indicators on businessregulation and protection of IP affecting 11 areas of business life: i) start-up: starting a business, minimumcapital requirement, procedures, time and cost; ii) expansion: registering property, procedures, time andcost; getting credit, credit information systems, movable collateral laws, protecting investors, disclosureand liability in related-party transactions, enforcing contracts, procedures, time and cost to resolve acommercial dispute; iii) operations: dealing with construction permits, procedures, time and cost, gettingelectricity, procedures, time and cost, paying taxes, payments, time and total tax rate, trading acrossborders, documents, time and cost; iv) insolvency: resolving insolvency, time, cost and recovery rate, so thatclarity on IP rights and cost of resolving disputes is key to ensure predictability, certainty and protectionthat the sector needs, in addition to supporting credit and enforcing contracts. Regulative processes alsodepend on macroeconomic conditions, market size, workforce skills and security. A vibrant privatesector with investments firms, job creation and improved productivity promotes growth-expandingopportunities for poor people. Governments are implementing reforms, including price liberalizationand macroeconomic stabilization; yet focus more on daily economic activity. The “Doing Bossiness”guide has advantages and limitations. It is transparent, factual on laws and regulations, yet it has a limitedscope in that if focuses on only 11 areas of regulation affecting local business and does not measure allaspects of business environments or all areas of regulation; it compares and benchmarks, yet it is basedon standardized cases; it is inexpensive and replicable, yet focuses on the formal sector; it is actionablewith data on obstacles, sources and points of change, yet, only reforms related to indicators can betracked; it has multiple interactions with local respondents to clarify potential misinterpretation, yetassumes that business is informed on requirements; and finally, it nearly completed coverage of world’seconomies, yet part of the data obtained refer to an economy’s largest business city only.On Gender, there is concern on low female participation in employment and self-owned business,inequity in job types, hours and wages, in addition to increasing numbers of economically inactivefemales, particularly in developing countries; as well as being able to assess the threshold, whereby thequantity of offered jobs in the market or the job-creation rate is enough to get female enterprises andemployment growing. Women, business and the law merit support and the need to remove barriers toeconomic inclusion. A WB/IFS study finds 103 out of 141 economies studies impose gender-based legaldifferences (accessing institutions, using property, getting a job, providing incentives to work, buildingcredit and going to court)30.The UNDP Human Report; links the Environment directly to the quality of life. Environmentalachievements, linkages and performance are greater in developed countries, yet environmental trendsover recent decades show deterioration on several fronts, with adverse repercussions for human28 DFID Growth Research Newsletter - December 201129 Doing business in a more transparent world , WB and IFC 2012-01-09. Comparing regulation for domestic firms in 183 economies30 CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 10 of 115
  11. 11. development, especially for the millions of people who depend directly on natural resources for theirlivelihoods. The most disadvantaged people carry a double burden of deprivation: more vulnerable to thewider effects of environmental degradation, they must also cope with threats to their immediateenvironment posed by indoor air pollution, dirty water and unimproved sanitation.Environmental degradation stunts people’s capabilities in many ways, going beyond incomes andlivelihoods to include impacts on health, education and other dimensions of well-being.A 10% increase in the number of people affected by an extreme weather event reduces a country’s HDIalmost 2%, with larger effects on incomes and on medium HDI countries. Meeting unmet needs forfamily planning by 2050 would lower the world’s carbon emissions an estimated 17% below what they aretoday. There are many promising prospects for expanding energy provision without a heavyenvironmental toll. The report argues that a clean and safe environment is a right, not a privilege andshould be embedded as environmental rights in national constitutions and legislations to be effective.This can be aided by empowering citizens to protect such rights and put a stress on the need to promotehuman development to address equity and care for environmental sustainability because of thefundamental injustice of one generation living at the expense of others, as it tackles innovative meansfor alternative and clean / renewable energy, clean water and sanitation, alongside reducing CarbonDioxide (CO2) emissions and green house effect.C. Education and human capital (Back)The needs to allocate sufficient human capital in the implementation of foreign technologies (Keller1996)31 is key in knowledge transfer, reliant on pro-knowledge absorption governing national policies,educational reform, (formal, informal education and vocational training) merging ICT in education,instilling knowledge economy and entrepreneurial skills through training for employment, job creationand innovation. Other knowledge transfer channels include labour markets, human capital mobility andlabour migration including different kinds of diasporas caused by imbalanced inter-state economic andcultural territorial relationships based on domination and subordination, where the type of socialcoherence plays an important role, such as ties with ancestral lands and hence lack of full assimilation tothe host country.The importance of building up human capital, was stressed by Keller (1996). To achieve higher growth, acountry must actively support human capital formation, otherwise it will be locked in the role of animitator. He pointed out that mere access to information is not sufficient for technological catch up. Inparticular, skill levels of domestic workers constrain a country’s ability to absorb and implementtechnologies invented abroad, emphasizing the key role of domestic skills in the assimilation of importedknowledge. Technology is only implementable among skilled labour force. Trade liberalizationdisseminates new technologies and goods to the domestic economy, but sustained growth gains are onlyforthcoming if in addition to the arrival of new technologies also skills are accumulated at a high rate.Education is considered as a key enabler to rapidly dominating social, economic and technologicalchanges, to prepare human capital for global knowledge-intensive economies and societies. Education foremployability in industrial societies, will no longer be a typical pattern of working life in new knowledge-based economy. In fact, in the enterprise sector, any given knowledge stock is becoming rapidly obsolete,as one takes on multiple occupations over working life. The growing internationalization of economicactivities, ICT and innovation have major implications on educational content, with no mere focus oncommon core competencies, but rather on specific profession-oriented knowledge. Therefore, there islittle value in educating people simply in the use of a particular technology or particular occupation-specific skills when any such technology or occupation is likely to become rapidly obsolete.“The top 10 in-demand jobs in 2010 didn’t exist in 2004; We are currently preparing students for jobs that don’t yet exist,using technologies that haven’t been invented, in order to solve problems we don’t even know are problems yet”, Richard31 Keller, 1996, p.200EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 11 of 115
  12. 12. Riley, former U.S. Secretary of EducationThere is a need to prepare a human capital with new sets of knowledge economy and ICT skills, namely:critical, creative and analytical thinking, problem solving, employing scientific research methodologies,working collaboratively and distantly within groups, gaining advanced communications and outreach skillsand competencies, in addition to entrepreneurship and job creation skills. Hence the creation of a self-and lifelong leaner, which is able to search for and identify available resources and tools, namely ICT; andharness those tools effectively and safely. Another important dimension in education, is good citizenship,democracy and human rights, in stand-alone models or ICT-based models given increasing role of socialmedia networks, digital multi-media material, speed and ease of communications and networking,fostering dialogue, exchange of information (knowledge transfer channels) and tolerance.Despite rapid socio-economic transformations around the world, education is slow to change (Kozma,UNESCO 2010)32; and although people work collaboratively using a variety of digital tools and resourcesto devise new ideas and products, students in schools are still meeting in structured classrooms atspecified times; (Law, et al., study, 2008), with ICT rarely being used. The shift from a paradigm that isbased on mass production and consumption of standardized goods and the hierarchical structuring ofbusiness, governmental and social institutions to a paradigm based on the collaborative, customizedcreation, sharing and use of new knowledge by a large, diverse and distributed population is creatingtremendous pressure for change on all components of the education system. It has profound implicationsfor what is taught, how it is learned, how teachers teach, how students are tested and how schools arestructured. And it has significant implications for changes in education policies, as well as the visions thatorganize structures, programs and practices in education systems. Changes in educational systems, insupport of knowledge creation, creates capital accumulation and increased productivity through capitaldeepening (knowledge acquisition), high quality labour (knowledge deepening); and knowledge creationand innovation (knowledge creation33) (Kozma 2007)34. Educational transformations come fromsystematic changes, involving vision, policy, planning and alignment between policies and programs,creative financing and resources, where ICT is a lever for change and enabler, acting on curricula andassessment, teaching and learning, teachers’ training and pedagogy, technology applications and socialinfrastructure. Despite the significant investment that policy-makers have made in hardware, software andnetworking, to date, ICT have had a marginal impact on education. Outside of schools, ICT have had asignificant social impact, too. Large numbers of people in developed countries use the internet regularlyto conduct online purchases, access government services, make friends, use online chat and messaging,download music and movies, play games, exchange email, conduct banking transactions and search forinformation, as they develop into a knowledge society. These changes are reaching the most remote ruralvillages in the least developed countries. Yet education remains, by and large, unchanged. For manypolicy-makers, it will be a major accomplishment to introduce ICT innovations that can, over time, bescaled up, system-wide.If research on ICT impact on the economy, business structures and on practices is any indication, themajor impact of ICT on education is yet to come. But it will only be realized when ICT is accompaniedby organizational changes and practices that align education systems with the emerging informationtechnology paradigm.Higher education witnessed new emerging dynamics in i) higher education demand: covering diversificationof provision, changing lifelong learning needs, growing ICT usage and enhanced networking and socialengagement with both the economic sector and community at large; ii) scientific research: particularlytensions between basic and applied research; and iii) fields of innovation: noting that innovation often occursoutside academic environments, as a result of inventive thinking and creative experimentation. Theadvancement of Knowledge Societies is compelling all countries, whatever their levels of developments32 May 3, 2010 ICT Policies and Educational Transformation - A UNESCO Publication. Chapter 2 - A Framework for ICT Polices to Transform Education - Robert B. Kozma, PhD.33 See Definitions34 Ref. ICT, Education Reform and Economic Development, Dr. Robert Kozma, Oct. 2007, Dead Sea, JordanEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 12 of 115
  13. 13. are, to review and reorganize their capacities for accessing and benefiting from the high-level knowledgewhich shapes social change, or otherwise risk marginalization. Today, systems of knowledge productioncover a vast range of entities inter alia universities, public laboratories, research centres, think-tanks runby policy and civil society groups, industry and the private sector and the military complex, with moreinclinations for sustainable social development orientation. This involves placement of knowledge toinclude high-level scientific knowledge, at the service of development; converting knowledge, in all itsforms, into value via applications and impact assessments; and sharing good practices, to ensurewidespread benefits. The knowledge divide on the other hand, is being created among nations, as aconcept that describes the gap in living conditions between those who can find, manage and processinformation or knowledge and those who are impaired in this respect and will become increasinglyisolated and marginalized. Governance of higher education is, in the end, primarily about the governanceand management of knowledge and knowledge workers; and the formation of coherent knowledgesystems that organizes knowledge within a coherent and accessible framework addressing posedchallenges where people converge around common understandings of the issues at hand and collaboratefor purposes of sharing knowledge, developing new knowledge, or even applying knowledge to their ownneeds” (Choucri, 2007). Added value provided by well-organized knowledge systems is the re-use and re-configuration of existing knowledge. In developing and developed countries alike, the utility of highereducation governance and management models will be judged in terms of how well they allow the highereducation institutions to contribute to further the knowledge society and knowledge economy.Challenges of academic work (Teichler and Yagci) include physical mobility of students, graduates andscholars. Most experts agree that mobility has accelerated in recent years, as a consequence of increasedopportunities, declining national controls and global economic and societal interconnectedness. Mobilityin higher education and research tends to be discussed notably in four respects: i) the role physicalmobility plays for knowledge transfer, ii) the contributions of mobility to quality of teaching, learning andresearch as well as the risks as far as quality is concerned, iii) the impact of mobility on the knowledge,values and subsequent life course of the mobile persons and iv) the ambivalent setting of costs andbenefits of mobility for the mobile persons, the higher education and research institutions and the nationsexperiencing an influx or out-flux of persons.UNESCO argues that student opportunities and problems linked to student mobility have changed inlight of evolving ‘knowledge societies’, playing a role in knowledge transfer, contribution to quality ofteaching, learning and research, impact on knowledge, values and subsequent life course of the mobilepersons and setting of costs and benefits of mobility for the mobile persons, the higher education andresearch institutions and the nations experiencing an influx or out-flux of persons.Education statistics collected by UNESCO show that the worldwide number of students studying abroad,i.e. in a country different from that of their citizenship, has increased substantially in absolute terms fromless than 200,000 in the early 1950s to more than 2 million in most recent statistics. However the overallstudent population has increased at a regular pace and the rate of foreign students has remained more orless constant at about 2%. Available data suggests that incoming students from other countries comprisemore than 10% of all students in various economically advanced countries and that of the students fromsome low- and middle income countries, more than half study abroad. International student mobility islinked to professional mobility and migration were many students in low- and middle-income countriesopt for study abroad in general, or choose the field of study or host country, in the hope that studyabroad will provide access to a career after graduation in an economically advanced country. However,temporary mobility within economically advanced countries, in terms of professional impact show thatthe study period abroad turned out to be helpful in the job search process, namely: formerly mobilestudents are more frequently professionally active abroad and those who are not employed abroad takeover clearly more frequently visible international assignments such as communicating with foreigners,using foreign languages, travelling abroad for professional purposes, using knowledge on other countries,etc.” (Rivza and Teichler, 2007: 465). “Brain Drain” on the other hand is the most frequently employedterm in this context to underscore the loss of investment and talent through outflow. “BrainCirculation”, in contrast, is often used to point out that countries facing an outflow of talent (also anoutflow of scholars) often experience a “return” in terms of remittances. “More developing countries areEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 13 of 115
  14. 14. seeing the diasporas as a source of expertise, knowledge and networks rather than only a source ofincome” (Knight 2007). “While the Brain Drain continues to be a reality for many developing countries,returning experts or the circulation of expertise can offer positive aspects, but require innovativeapproaches to academic and professional credentials. Examples of this include Silicon Valley IT expertsreturning to India, mobilization of the diasporas from Africa and the Arab states and burgeoningcooperative arrangements such as joint professorships, dual research appointments and laboratories(known as ‘collaboratories’) and jointly awarded graduate degrees” (Kearney 2008). Altogether, thereseems to be an inflationary use of the term “brain circulation” in order to play down the net losses manylow- and middle-income countries suffer from, in light of the international mobility of highly-qualifiedlabour and notably of researchers. Thus, it cannot come as a surprise that calls are often made for thereceiving countries of mobility to compensate financially the enormous losses of the sending “drained”countries.Impacts of Brain Drain: the financial cost of $4 billion is spent annually on the salaries of approximately100,000 western expatriates who help make up for the loss of professionals in sub-Saharan Africa.Policymakers worry about subsidizing the education of students who ultimately go elsewhere. The cost oftraining, for example, a non-specialized doctor in a developing country is about $60,000 and for aparamedical specialist about $12,000.D. Innovation, S&T and R&D (Back) Innovation as one of the key enablers of knowledge transfer and absorption and can manifest itself in different forms and levels across sectors and borders, through the promotion of S&T, openness of academic research, scientific cooperation in education and research, patents, domestic R&D, institutions linkages with industrial, service and business sectors, as well as the promotion of academia and industries linkages for effective diffusion of innovation. Demand and acceptance of innovation is enabled and enhanced by socio-economic policies that mobilize and promote governments’ roles, markets, social factors and active educational and research cooperation networks with enhancive international communities to knowledge absorptive that is vital to the economy (Gallouj 2000)35. Entrepreneurship and innovation for economic development (UN University)36 are two of the most pervasive concepts of our times, yet there are still gaps in our understanding of the interactions between entrepreneurship and innovation, particularly in developing countries.A key message is that entrepreneurial innovation, whether through small firms, large national firms, ormultinational firms, is often vibrant in developing countries, but does not always realize its full potential.This is due to institutional constraints, the absence of the appropriate mix of different types of small,large, domestic and foreign firms and insufficiently developed firm capabilities. There is a need to assessthe impact of entrepreneurship and innovation on growth and development, determinants and impacts ofinnovative performance of entrepreneurs in developing countries and the role institutional environmentsplay in shaping the extent and impact of innovative activities, as well as policies and institutions thatsupport or hinder innovation.The Europe 2020 Strategy (EIB)37 suggests that knowledge and innovation for sustainable growth canbe achieved through resource efficiency, greener and competitive economy; high employment economy,research, climate action and energy; education; and combating poverty. It all starts with education whichsupports employability, greater capacity for R&D, innovation across all sectors of the economy that iscombined with increased resource efficiency, improved competitiveness and job creation. Investing incleaner technologies helps our environment, contributes to fighting climate change and creates newbusiness and employment opportunities. ICT infrastructure and digital networks strengthen and35 Gallouj, 200036 CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 14 of 115
  15. 15. accelerate this dissemination. Competition and innovation-driven growth (WB)38 can be promoted byincreasing competitiveness in the manufacturing sector. World Bank studies show that innovative firmsexhibit higher employment growth, depending in strength on the level of skills and qualifications, withyounger firms portraying higher innovation rates, where enabling pro-competitive enabling environmentssupport access to information, finance, export opportunities, essential services that facilitate entry andexpansion of young firms. The Global Innovation Index39, explores the transformative power ofinnovation and identifies its enablers that are important for socio-economic growth, despite datalimitation and different interactive factors per country.A global assessment on “Science and Technology” in terms of budget, human resources, status ofscience and research goals and despite formal similarities among countries, found out that: i) emergingcountries use science as a tool for innovation, supported by state and incentives, seeking internationalcooperation and participation; ii) research is seen as luxury, distant from needs and out of reach; fundingis accepted without working on projects themselves, as some countries suffer from wars or poverty. Yetsome countries are rich with oil and do not need research for economic reasons; to those, research is adecoration, as some tribal or monopolizing regimes have divergent values. The little science that remainswill need international support to ensure viability and sustainability. Authorities should take interest,private sector participation inclusive academia should play an active role; and iii) intermediary countrieshave not clearly identified the actual function of research, with fluctuating state support. Institutions arestrong, where researchers are firmly rooted, yet strategy building is difficult. Components of S&T arereliant on human resources in terms of numbers, critical mass, profession standards, work conditions andbrain drain. The challenge has become to keep capacities from disappearing, by building on goodtreasures (dedicated scientists) and availing enabling environments for their research (labs, networks…).International support and appropriate mechanisms can boost research (UNESCO)40.RDI systems are reliant on these critical activities: i) provision of R&D investment to create newknowledge, primarily in engineering, medicine and natural sciences, ii) capacity-building to create a highlyskilled work force to be used in R&D, iii) establishment of new product markets, iv) quality assurancemechanisms, v) encouraging creative organizations which promote entrepreneurship and enhance theinfrastructure to boost innovation, vi) networking through markets and mechanisms with interactivelearning amongst the institutions involved, vii) creating enabling institutions which facilitate innovation -such as IPR and tax laws, R&D investment, sound environmental and safety regulations; viii) incubationactivities to foster innovative projects; ix) financing of innovative processes to facilitate thecommercialization of knowledge; and x) consultancy services for technology transfer - including the legal andcommercial aspects of innovative activities (Edqvist, 2006). In such a climate, innovation can begenerated from the synergies amongst opportunities, capacities, resources and incentives. Countries withrobust innovation systems have privileged research in a variety of contexts including universities and theprivate sector. This has led to new challenges for research management and universities to expand theirresearch links with industry, commerce, government and the community at large.Universities are key players who fuel through “Research” the reservoir of future researchers and highlyqualified, inquisitive and creative human capital for production sectors, given the advantage of harbouringthe greatest number of researchers, adding value through liaisons with other international bodies.Nationally universities can participate in dealing with impending problems. Challenges facing research hasbeen attributed to: financial, professional and institutional reasons. Universities have to compete forfunding, based on value and assessment from basic to applied research. Research centres face moreserious dilemmas, as mostly are ‘mission oriented’, set up to provide new technologies to governments, orentrusted with public services requiring accuracy and reliability (e.g. producing vaccines). Issues to addressare the roles of centres, whether technical, service provision, social programs or other sophisticatedservices for international firms. Research needs setting up or strengthening of adequate building blocks,38 Global Innovation Index 2011 Accelerating Growth and Development Soumitra Dutta, INSEAD Editor40 Mapping research systems in developing countries, UNESCOEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 15 of 115
  16. 16. namely laboratories, supported by criteria-based assessments, for both research outputs. Cooperation isvital for co-authorships, which are indicative of multi-national cooperation, less occurring in Africa, Asiaand the ME and mostly taking place in Europe, USA and Japan, by scientists from the metropolis ofscience. Yet, many emergent countries have national articles (India, China, Asian).The UNESCO Forum on Higher Education (2009)41 focused on the role and status of “NationalResearch Systems” in relation to the challenges posed knowledge economy and policy dialogue on keyunderpinning research systems: (i) policy trends; (ii) infrastructure; (iii) human capacity; and (iv)investment, as well as charting the course in light of new and changing knowledge society dynamicswithin the areas of higher education, research and innovation, namely: (i) demand; (ii) diversification ofprovision; (iii) changing lifelong learning needs; and (iv) growing ICT usage, enhanced networking andsocial engagement, both with the economic sector and with the community at large. Increasedpartnerships among governments, economic sectors and research universities help link knowledge todevelopment goals, needed a flexible and pragmatic research approaches, within academia. Overall, thesituation of research universities in low-income countries remains bleak needing rapid and effectivesolutions. Other challenges facing research include equity; quality; relevance; ownership; internationalnetworking, research and innovation systems that support creation of new knowledge through R&D,human capital, new product markets, quality assurance, creative organizations, entrepreneurship,infrastructure, networking and interactive learning, innovation-based environment, support to IP rights,tax laws and other safety regulations; in addition to incubation activities to foster innovative projects;financing of innovative processes to facilitate the commercialization of knowledge; and consultancyservice for technology transfer (including legal and commercial aspects of innovative activities (Edqvist,2006).One success story is the significant rise in the number of Singapore’s Research Scientists and Engineers(RSEs), from 4329 in 1990 to 11,596 in 2004 (Mouton, 2007).E. ICT infrastructure (Back)A dynamic ICT Infrastructure ranging from radio to the internet is required to facilitate effectivecommunication, dissemination and processing of information, hence a key knowledge transfer enablerand communications channel and network. The impact of ICT is reliant on the human capital and theavailability and level of the ICT infrastructure, in addition to the governments governing policies andinterventions, on the national level, while being reliant on skills set and degree of innovation, on thebusiness level (UN Conference on Trade)42, yet measuring this impact is difficult due to the diverse andchanging nature of ICT, complexity of impacts and illustrating a cause-and-effect relationship betweenthe different variables. However, positive impact was found on economies, businesses, poor communitiesand individuals, directly and indirectly across economic, social and environmental realms. ICT is also usedin management information systems (MIS) and decision support systems (DSS). Challenges facing suchsystems, are updating, particularly from very old technologies, as well as maintenance, skilled humanresources and finance. The global telecommunications services (Pyramid Perspective 2012)43 market isexpected to grow at a more modest 4% in 2012 (after expanding at7% in 2011), as a result of the risingvolatility and uncertainty facing the global economy, at a total service revenue of US$1.7 trillion, or 2.4%of global GDP (2012). Mobile broadband, enabled by the proliferation of high-speed mobile computingdevices including smart phones and tablets, will be one of the largest growth areas in 2012, enablingfurther penetration in emerging markets. Regulators and policy makers around the world are pushing forbroadband adoption, putting incentives to increase investment in broadband infrastructure, key fordevelopment as governments make unprecedented financial commitments to the sector and mobilizingprivate capital along the way. Since the late 1990s wireless technologies and liberalization oftelecommunications markets lead to tremendous access to ICT.41 Ref. Higher Education, Research and Innovation – changing dynamics, Higher Education, Research and Innovation: Changing Dynamics Report on the UNESCO Forum on Higher Education, Research and Knowledge 2001-200942 Measuring the Impacts of ICT for Development. UN Conference on Trade & Development43 Pyramid Perspective 2012 Top Trends in the Global Communications IndustryEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 16 of 115
  17. 17. Part IISituational Analysis of the Knowledge Transfer Channels in theMiddle East and North Africa (MENA), Gaps andRecommendations(Back)Developing countries are facing challenges in attaining knowledge-empowered systems, failing to tap thevast and growing stock of knowledge because of their limited awareness, poor economic incentiveregimes and weak institutions, thus increasing the “Knowledge Divide” between them and countriesthat are generating most of this knowledge, amidst increasing international competition emitting out of acombined trade policy liberalization and knowledge revolution, challenging the natural resources and lowlabour costs advantages most developing countries had relied, or still relying on. A widening knowledgegap with industrialized countries, is attributed to lack of innovative capabilities, R&D, scientific articles,patents and inequality in internet accessibility.Developing countries need to build on their strengths and carefully plan appropriate investments inhuman capital, effective institutions, relevant technologies, innovative and competitive enterprises inorder to capitalize on the knowledge revolution and improve their competitiveness and welfare. A. Socio-economic regimes (Back)Arab countries, of about 355 million inhabitants, stretch by more than 6300 km from Baghdad toNouakchott, of lower middle income classified economies, with Egypt having the largest market andpopulation size of 23% of the Arab world (about 80,8 million)44. In fact 6 Arab countries account formore than 70% of population. In terms of GDP Saudi Arabia alone accounts for more than 26% of totalArab GDP and only 6 countries account for nearly 70% of total Arab GDP (2007). The Arab region isvery heterogeneous in terms of economic and social development. Its market size and businessenvironment climates vary, as does the income per capita of 80,000 US$ in high income GCC countriesto just 385 US$ in low income countries such as Mauritania, Sudan and Yemen.Knowledge economy oriented policies in the MENA are taking the low-road approach to economicdevelopment, as the UNIDO report (2002/2003) points out, when confronted with intense globalcompetitive pressures, developing countries may be tempted to take the low road and foster developmentby devaluating exchange rates, disregarding labour or environmental regulations and reducing wages, onlyto enrich the few and perpetuate social inequities – a trait seen during Arab Spring. A high-road approachto economic development, in when less-developed countries use competitive advantages, create a stablemacroeconomic structure, liberalize trade, develop human capital and infrastructure and attracttransnational corporations, foreign direct investment and imported technology. Knowledge, educationand infrastructure play particularly important roles in the high-road approach, as witnessed in 13 countries(Commission on Growth & Global Development)45, crafted policies to create economic growth of 7%GDP over 25 years, in countries that were poor 35 years ago (such as Singapore and Thailand) hadinvested in schooling its citizens and deepening its human capital. The development of human capital wasone of the principal means by which government policy was used to support economic development inthese high growth countries. Conversely, the study found that no country had sustained rapid growthwithout also keeping up impressive rates of public investment in infrastructure and education. But forthose policy-makers who choose the high road, development policy and programs can build theinfrastructure, human capital and knowledge needed to fuel economic productivity, while promotingsocial equity and broad-based44 2010 (Wikipedia)45 Commission on Growth and Global Development (2008)EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 17 of 115
  18. 18. Using World Bank Governance Index and indicators, the quality of Arab institutional framework wasassessed; showing that Arab countries in general suffer from a weak regulatory framework andwidespread corruption. The Corruption Perception Index, published by Transparency International,assessed the magnitude of corruption in 180 countries based on 13 independent indicators in the publicand political sectors. Arab countries showed a level of ‘Perception of Corruption’ of less than 5 on a scaleof 1 – 10 . This implies a direct correlation between the spread of corruption and the decline ofgovernment performance. Jordan scored a little above 5. Corruption and regulatory frameworkassessments showed that only 7 Arab countries had positive scores (2007). Countries that had relativelybetter governance status are Bahrain, Jordan, Kuwait, Oman, Qatar, Tunisia and the UAE. It is clear thatthe quality of the institutional framework is a big handicap for FDI inflows to the Arab region. Politicalstability is low, rendering a risk-prone region that inhibits foreign investors despite the investmentopportunities of the region. Only 6 Arab countries had positive values on political stability of the indexout of 17 Arab countries. The rule of law situation is better with 8 countries having positive scores,Long term impact of a stable macroeconomic policy is essential as FDI responds to macroeconomicfundamentals rather sluggishly (Kamaly, 2006), therefore, macroeconomic stability is important totranslate the impact of FDI on economic growth (Jallab et al, 2008). FDI exerts a positive impact ongrowth, but more so through employment and value added and less through spill-over effects oftechnological transfers (Nicet-Chenaf, 2007). FDI inflows to the MENA region are not relatedinvestments to human capital and technology (Onyeiuw 2008), yet the difficulty of measuring humancapital and technology in the region due to serious data limitations makes it difficult to conclude thatthese factors are not relevant to FDI. The region is not FDI attractive despite good macroeconomicframeworks and progress in liberalization. Trade and exchange liberalization, infrastructure availabilityand sound economic and political conditions help increase FDI (Sekkat and Varoudakis 2004). Arabcountries aiming to attract European FDI should learn from East European experiences in terms ofregulations and use of investment diplomacy as a tool to attract more FDI (Zukrowska et al, 2006).Multinationals allocate FDI to regions where return is highest – this is heavily impacted by the quality ofinfrastructures; most countries aim for more FDI by investing in infrastructure projects, since the qualitybackbone services are affecting FDI inflows to MENA countries (Sekkat, 2002).The status of infrastructure is linked to the level of economic development. Most Arab non-Gulf countriesneed to upgrade their infrastructures in order to improve their business environments.Arab Countries Share in Global FDI Inflows and Cross-border Mergers and Acquisitions (1997-2006)was $62,406 M, which is 16.% of the developing countries share and 4.8% of the $1,305,852 M globalshare. The impact of quality institutions on FDI flows is evident . Bad institutions and governance deterFDI and increase the risk of hesitation among investors. Using World Bank Governance Indicators(Marani 2007)46 developed by Kraay et al (2005) found that institutions play a significant role ininvestment attractiveness of countries. Alessandrini (2000) concentrated on the role of legislation andregulation that directly manage FDI inflows. Sarisoy et al (2007) argued that FDI depends on the politicalregime. He found that autocracies are likely to receive relatively more vertical47 FDI, whereas democraciesare more likely to receive more horizontal FDI.Attracting higher levels of FDI is premised upon a sufficient level of education and skills. Withoutpolicies and systems in place to ensure increasing levels of skills formation, investors choose otherdestinations or bring low levels of technology which is not upgraded over time and fails to increasedemand for higher skilled labour (Lall 2000).46 Marani (2006)47 See DefinitionsEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 18 of 115
  19. 19. According to the Arab Human Capital Challenge Report (UNDP/MBRF 2009)48, record high levels ofliquidity in the Gulf have encouraged public spending, re-investment and FDI outflow to many Arabcountries such as Egypt, Jordan and Tunisia. This FDI outflow has gone into numerous sectors that havesince prospered, such as tourism, real estate, construction and financial services. These sectors becamemain vehicles for growth and generated employment for people in the region at all levels, creatingheightened need for skilled and qualified labour. Intra-Arab FDI is found to be very unpredictable andunevenly distributed between countries, yet encouraged by regulating environments, discouraged byinfrastructure quality and can benefit from improved business environment, control of corruption, risksand deepening cooperation. FDI flows are determined by market size, purchasing power, quality of thebusiness and investment environment. Trade flows are strongly related to investment flows, howevereconomic freedom is not a strong impediment to attracting FDI as most government have specialregulations with regards to FDI. It is important to highlight economic, geographical and regulatoryfactors involved in the intra-regional investment decision to address the gaps and strengthen the driversof intra-regional FDI (Laabas & Abdmoulah)49. Inter-Arab investment flows, are shown using anaugmented gravity model based on both Standard Gravity Variables (distance, income and population,congruity and other dummies) of both sending and receiving countries, as well as on a set of variablesspecific to cross-border investment flows using panel data of Arab countries. Table 1 Inward FDI flows, in $M, current prices & exchange rates, 2000-2010 (sorted & rounded figures 2010)Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010S. Arabia 183 504 453 778 1,942 12,097 17,140 22,821 38,151 32,100 28,105Egypt 1,235 510 647 237 2,157 5,376 10,043 11,578 9,495 6,712 6,386Qatar 252 296 624 625 1,199 2,500 3,500 4,700 3,779 8,125 5,534Lebanon 964 1,451 1,336 2,860 2,484 3,321 3,132 3,376 4,333 4,804 4,955UAE -506 1,184 95 4,256 10,004 10,900 12,806 14,187 13,724 4,003 3,948Jordan 913 274 238 547 937 1,984 3,544 2,622 2,829 2,430 1,704Tunisia 779 487 821 584 639 783 3,308 1,616 2,758 1,688 1,513Morocco 422 2,808 481 2,314 895 1,654 2,449 2,805 2,487 1,952 1,304Palestinian 62 19 9 18 49 47 19 28 52 265 115Kuwait 16 -176 4 -67 24 234 121 112 -6 1,114 81Yemen 6 136 102 6 144 -302 1,121 917 1,555 129 -329 Table 2 Outward FDI flows, $M, current prices & exchange rates, 2000-2010 (sorted & rounded 2010)Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010S. Arabia 1,550 46 2,020 473 79 -350 -39 -135 3,498 2,177 3,907Kuwait -303 -242 -77 -4,960 2,581 5,142 8,211 9,784 9,091 8,636 2,069UAE 424 214 441 991 2,208 3,750 10,892 14,568 15,820 2,723 2,015Qatar 18 17 -21 88 438 352 127 5,160 6,029 11,584 1,863Egypt 51 12 28 21 159 92 148 665 1,920 571 1,176Morocco 59 97 28 12 31 75 445 622 485 470 576Lebanon 108 1 0 611 827 715 875 848 987 1,126 574Tunisia 2 6 6 5 4 13 33 20 42 77 74Yemen -9 1 39 61 21 65 56 54 66 66 70Jordan 9 32 14 -4 18 163 -138 48 13 72 28Palestinian 213 377 360 49 -46 13 125 -8 -8 -15 -11 UNCTAD, UNCTADstat (back to list of tables)48 Arb knowledge report 2009, Towards Productive Intercommunication for Knowledge, Mohammed bin Rashid Al Maktoum Foundation (MBRF) and the United Nations Development Programme/ Regional Bureau for Arab States (UNDP/RBAS49 Belkacem Laabas, Walid Abdmoulah API/WPS 0905EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 19 of 115
  20. 20. From 2000 to 2008 trade as a percentage of regional GDP (Schwalje, LSE/UK)50 increased at acompound annual growth rate of 2.87%, with imports and exports increasing from 72% of regional grossdomestic product (GDP) in 2000 to 90% in 2008. Trade in knowledge-based services as a percentage ofregional Gross Domestic Product (GDP) also increased from 2000 to 2009 at a compound annual growthrate of 2.76% which was roughly the same as the OECD countries. Exports of knowledge-based servicesduring this period increased at a compound annual growth rate of 12.40% which was less than S. Asia at24% and E. Asia and the Pacific at 13.41% but comparable to OECD countries at 11.23%. However,export sophistication is declining. Royalty and license fees decreased at a compound annual growth rateof -2.3% from 2000 to 2009.Only 1% of the Arab World’s manufactured exports are classified as high-technology, R&D intensiveexports and the region’s portion of high technology exports as a percentage of manufactured exportsactually declined at a compound annual growth rate of -4.83% from 2000 to 2009 (Bank 2010).The "Investment Climate in the Arab Countries 2007 Report51" shows a stable investment climatedespite regression in composite indicators, inclusive surged inflation in 12 Arab countries. There was anunprecedented growth of US$ 62.4 B in 2006 (UNCTAD 2007) accounting for 4.8% of the global FDIinflows, as an outcome of the tangible increase in FDI inflows to 14 Arab countries (Egypt, KSA, Jordan,Sudan, Lebanon, Oman, Qatar, Syria, Algeria, Bahrain, Tunisia, Djibouti, Libya and Somalia), on onehand and decreased FDI inflows to 7 Arab countries (UAE, Morocco, Mauritania, Iraq, Palestine, Kuwaitand Yemen), on the other. Arab foreign trade in 2007, grew by around 15.1% (WTO 2007 Estimates), sothat total Arab foreign trade, excluding Iraq & Somalia, amounted to US$ 1234.9 B, of which exportsaccounted for 60.6%, i.e. US$ 749 B and imports for 39.4%, i.e. US$ 486 B. There was a tangible progressin Arab stock markets, following reform and corrective programs adopted by most Arab stock markets(2005 - 2006). Amended legislations, enhanced market watch and control and appropriate policies werefurther boosted towards more appropriate doing-business environment. Investment legislations andreform enhanced the doing-business environment through improvement of investment laws, taxincentives & exemptions, bilateral, international & regional agreements, new free areas & industrial zones,new airports & seaports and activation of the private sectors role within the comprehensive economicprocess. New economy components were further boosted through the possession of latest IT &Telecommunications applications, improvement of digital infrastructure, transparent economic statistics& databases as well as programs for poverty elimination, employment, woman empowerment andenhancement of civil societies. The periodic international sovereign rating by the Financial Times, basedon the sovereign rating of the international credit rating agencies, showed that Egypt, Morocco andJordan had a ‘speculation grade’, medium risk and probability of payment risks, while the CompositeCountry Risk Index was low for Jordan and Tunisia and moderate for Egypt. The Euro-money CountryRisk was moderate for Tunisia and Egypt and high for Jordan. The Institutional Investor for CountryRating was moderate for Tunisia and high for Jordan and Egypt. The DUN & Bradstreet Country RiskIndicator was low for Tunisia, moderate for Jordan and Egypt. The COFACE The GlobalCompetitiveness Index (2007)showed improvement in Tunisia’s rank and dropped down ranks for Jordanand Egypt. Doing Business 2008 ranks were 80 for Jordan (dropped) and 88 for Tunisia (dropped), whileEgypt showed improvement. Gulf countries were leaders on related indicators, followed by mediumincome countries (Jordan, Lebanon, Tunisia, Egypt, morocco), reflecting a negative correlation betweeneach countrys level of income and its digital divide. Arab telecommunications & ICT markets weresubject to reforms by independent regulative bodies to create favourable investment climates andpromote market opportunities.Political players, public, private and civic sectors, the diasporas and the international community are all“Actors of Reform”. Political actors decide the feasibility and implementation of reforms, so that theyare influenced by the change demand and the nature of the regimes. The bureaucracy in the region, highlysized, is one of the major reforms blockers. Public servants have often rent-seeking behaviour for their50 Wes Schwalje, LSE, UK51 Investment Climate in the Arab Countries 2007 - The Arab Investment & Export Credit Guarantee CorporationEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 20 of 115
  21. 21. own and their mentors’ benefits. This explains the large observed differences between regulations andtheir enforcement. The private sector is one of the main beneficiaries of the reforms but often incollusion with political powers. The civil society is one of the main actors of change, with exceptionsresisting change, like education trade unions to protect the teachers’ interests. The media are aninstrument for dissemination of knowledge especially the social media. The Diaspora’s role is enhanciveto knowledge economy and should be drivers of change, while the international community is supportivein terms of nationally channelled financial assistance and opening up trade access to their markets, whileintroducing more open policies towards immigration and support to outflows going to the Arabcountries. This support should be used as an incentive to change.Reform should lead to structural trade and investment policies, downsizing of public sector, financialsector, competition and innovation, governance, government effectiveness, accountability, control ofcorruption and stability.Education, gender disparities and youth exclusion should be set also as top priorities. The feasibility ofreforms depends on local conditions. The most difficult part is related to the societal dimension, thesegroups could be considered: (i) in-transition groups that need to build governance reforms and conduciveenvironments for KE, (ii) constitutional reformers (e.g. Morocco and Jordan that set up inclusiveprocesses to build reforms for democratic transition). The sequencing of reforms is essential for successand must be adapted to the specific situation of each country, based on progressive approach with shortterm wins anchored in a shared long term vision for change. This approach will be then strategic withadequate participatory, transparent planning, budgeting, monitoring and evaluation frameworks.Arab countries seem to have missed on rapid diffusion of ICT (Samia Satti)52, advanced knowledgesystems, recent trends of globalization and impact on economic systems and global prosperity arelagging behind in terms of knowledge, skills, technological capabilities, spending, diffusion of ICT,competitiveness and average growth rate. Their poor performance minimizes their integration and sharein new and global economic systems, portraying poor technology achievement index, poor absorptivecapacity and capacity to create knowledge. Gulf countries are leading the Arab States in terms of GDPper capita, human development indicators, spending and diffusion of ICT, but fail to present aconvincing and coherent performance in the new economy. Arab countries show that most of R&D,FTE researchers and S&T activities are mostly allocated within both public and university sectors. Thereis also a gap in terms of ICT diffusion, in particular, the Internet users, telephone mainlines and cellularsubscribers, with higher numbers of users in the Gulf. The Arab region failed to reach economic convergence with developed countries (average per capitaGDP hovers around 8% of that of N. America and has even decreased relative to the EU and E. Asiancountries), with lower labour market participation rates, especially for women and high unemployment, inparticular for the youth who suffer the highest regional level of unemployment (24.4%) in the world.This stunning figure explains, along with the quest for freedom, good governance and social justice, thefrustration that led to what is now called the “Arab Spring”, calling for the need to adjust the economicmodel for rapid, sustained and inclusive growth, with high levels of job creation.This can be achieved by strengthening productivity and the competitiveness of regional economies,shifting towards a knowledge-based economic model that opens up opportunities to FDI and trade (twochannels for technology inflows), develop education and training to step up readiness to knowledgerendering skilled and productive workforce, fosters innovation and makes a full use of the ICT for thedevelopment.The success of the KE model depends on credibility and government commitment towards ensuringefficient transformation of resources into outcomes by building sound institutions, especially budgetaryones, managing public servants on merit-basis and applying the rule of law that is essential to ensure52 Ref. The incidence and transfer of knowledge in the Arab countries Dr. Samia Satti Osman Mohamed NourEIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 21 of 115
  22. 22. confidence in national institutions, especially by building a credible and predictable judicial system.Indicators of knowledge economy include measures of GDP growth, poverty, tariff and non-tariffbarriers, regulatory quality, rule of law, royalty & license fees payments & receipts, S&T journal articles,granted patents, adult literacy rate, secondary & tertiary enrolment, telephone & computers & internetpenetration. The Arab world, falls short on most of these indicators, as shown in Figure 1. Figure 1 Knowledge Economy Values Source: KE Report, WB database, Knowledge Assessment Methodology KAM) (back to list of figures)According to the WGI, the region is still underperforming many others (36%). Fight against corruption thatundermines the credibility of policies and institutions and the confidence of investors and citizens alike intheir governments is too low in this central dimension (34%); and enhanced security that is the basis forbuilding any development, especially a knowledge-based one, that needs a lot of inflows from thetechnological frontier, is also low. Economic and institutional regimes should foster trade and investmentflows for the transfer of technology and stimulate efficiency, for a knowledge-led growth model. Theregion remains relatively closed with highest overall Trade Restrictiveness Index with less than 1% ofworld exports (excluding oil), lack of facilitation (28 days for customs procedures against 12 days inOECD), mediocre transport infrastructures and logistics performances (the latter’s index is one pointbelow the OECD average).Knowledge transfer from expatriates to national staff, as per the Arab Human Capital Challenge Report,is shown by Arab CEOs to be 74%. However, this rate was lower in UAE and Qatar than the remainderof Gulf countries and much larger at 88% - 85% respectively in the Levant and North Africa. Knowledgetransfer was more significant in key drivers of economic growth: financial services, media, entertainment,transport, logistics and storage (80’s%), followed by retail and consumer goods, energy and travel andtourism (70s%), mining and utilities, engineering and construction and real estate (60s%).EIB CC4459 / PO43610 “Case Study on Knowledge Transfer in MENA Countries - Jordan”March 10, 2012 - Reem N Bsaiso – Email: Page 22 of 115